Thomas Malnight, International Institute for Management Development (IMD) and Ivy Buche, International Institute for Management Development (IMD)
The COVID-19 pandemic has prompted different responses from company CEOs seeking to ensure their businesses survive. Keeping their employees safe has been the first priority, but beyond that, their task has involved understanding the situation, launching countermeasures, and trying to evolve ways of working to ensure their businesses can continue.
We spoke to the chief executives of three major companies in three very different industries. In their responses to the crisis, we found that Winston Churchill’s adage of “never let a crisis go to waste” was as relevant as ever, with businesses finding positives during the pandemic.
Shipping giant AP Møller-Maersk embarked on a historic transformation in 2016 to become an integrated transport and logistics company – combining its shipping line, port operations, and freight forwarding businesses into a single entity. However, progress had been limited.
The pandemic brought unprecedented challenges to Maersk’s customers who, faced with falling demand, had to manage their global supply networks as effectively as possible. They wanted better information across the supply chain and the ability to change outcomes while goods were in transit.
These demands affirmed Maersk’s strategy to shift from being a port-to-port container transport company to an integrated, end-to-end logistics company, making use of digital technologies to provide the connectivity and visibility that customers required.
Maersk’s customers turned to its blockchain-enabled supply chain platform TradeLens, where the number of transactions almost tripled from 70,000 a week in January 2020 to 194,000 a week in June. Transactions through Maersk.com increased by 20%-25% between January and October 2020. Maersk’s CEO Soren Skou told us: “The investments we made in the last five years in digital capabilities came in very handy during COVID-19.”
The pandemic accelerated Maersk’s technological transformation efforts, which led to new digital products and services while modernizing its customer interface, back-end infrastructure, and assets such as ships and terminals. Maersk also built expertise through acquisitions, purchasing warehousing and distribution company Performance Team, and customs management firm KGH Customs.
Skou was able to apply what he’d learned from the financial crisis of 2008-09 when Maersk and its competitors fought for market share and ended up driving down freight rates. This time, Skou focused on profitability: cutting capacity by 20%, but filling the remaining vessels even as the pandemic caused shipping volumes to drop. The plunging price of oil also helped Maersk’s financial performance, and its earnings actually increased in the first three quarters of 2020, despite the near-paralysis of the global economy.
Large companies are often seen as slow and trailing in innovation compared to smaller, more nimble competitors. Standard operating procedures mean they focus on developing “perfect” solutions, testing in pilot markets, and proving the business case over a couple of years, before finally rolling out – by which time they have probably missed the boat.
Mars Petcare, a global leader in pet food and pet health services, found that COVID-19 necessitated scaling up innovation. Prior to the crisis, the company had been working on a telehealth service for pet owners, offering video consultations with vets at 20 veterinary hospitals, where it proved to be a valuable triage tool for prioritizing cases.
As the pandemic took hold, pet owners started working from home, inevitably spending more time with their pets which generated more queries about minor health issues. An initial video call with a vet was an ideal solution.
Working with Microsoft, the company scaled its telehealth service from 20 to around 2,000 veterinary hospitals – in one month. Poul Weihrauch, global president of Mars Petcare, told us:
This may not help our earnings in the short term, but it will make the clients happier and pets healthier today and in the long term. A common belief is that big companies are slow, but this shows that big companies can scale innovation very quickly. This time, it was done by necessity… but clearly the goal is that it should be the norm
These efforts, spurred by high demand during COVID-19, tied in well with Mars Petcare’s strategy to dramatically accelerate its evolution from pet food manufacturer to provider of pet care services.
Engage with employees and customers
When the pandemic struck, security became an “essential service”. Security company Securitas realized it needed to quickly ramp up its electronic solutions. This validated the company’s strategy launched in 2018 to evolve from providing traditional physical guarding to digital security solutions such as facial recognition technology and remote video monitoring.
CEO Magnus Ahlqvist wanted to manage customers’ uncertainty, outlining how Securitas was dealing with the crisis. He and his management team worked with major clients, with a similar sponsorship system for each of the countries in which Securitas operates. Ahlqvist told us:
“I have spent more time with clients than I would normally… Being visible and present for clients in a tough moment will pay off in the long term”
The Swedish company’s 340,000 frontline guards had to rise to an unprecedented challenge, for which the company pushed hard to equip them with better digital tools.
Having already embarked on strategic transformations, these firms were well equipped to turn an unparalleled threat into an opportunity. Setting a good example from the top, the chief executives were able to put the crisis to work by accelerating strategy, scaling innovation, and deepening customer engagement, generating the energy required for the organization to thrive, despite the hurdles thrown up by COVID-19.
Thomas Malnight, Professor of Strategy, International Institute for Management Development (IMD) and Ivy Buche, Associate Director, Business Transformation Initiative, International Institute for Management Development (IMD)
This article is republished from The Conversation under a Creative Commons license. Read the original article.